Questions To Ask Your Small Business Finance Advisor

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Questions To Ask Your Small Business Finance Advisor

Let’s say your business has grown to a point where you need to consider hiring a finance manager. Maybe your enterprise is now a middle-market company, big enough to justify giving your “numbers person” a bigger title.

But how will you make sure that you’re getting what you need out of this key hire? Here are five thematic questions to guide you in working with your finance manager.

1. What’s our cash story?

Knowing your company’s daily cash position is one of the best exercises you can engage in as an owner or CEO. Asking this question frequently, and signaling its importance to you, creates a teamwork mentality.

Getting a daily read of the enterprise’s cash position builds an intuitive sense of the seasonal ebbs and flows of your business. When balances linger for too long at a marginal level, however, you’ll know in your gut that inquiries need to be made. Avoid letting your finance manager worry over cash alone.

2. What from the dashboard (or other reporting framework) leaps out at you?

Increasingly, CPAs build visual “dashboards” in Excel, or utilize off-the-shelf business intelligence software available from companies like Tableau or Qlik. These let you obtain a quick read of an organization’s health and pain points in graphical formats. Make it a point to regularly review these types of reports with your financial manager. Pick his or her brain on the positive and negative trend lines.

3. What, in your opinion, is our most important key metric?

In most businesses, a handful of important metrics exist which, if tracked and optimized, will increase the organization’s success. But to take things a bit deeper on both a business and a philosophical level, a business owner should know what his or her most important key metric is. In other words, what activity, resource, or sales result is most crucial to the company’s current success?

4. What should IT spend its money on next year?

In small businesses, and even some middle-market companies, IT help is often spread extremely thin. Between installing and caring for computer and mobile devices, and implementing “glue” software that helps, IT staff don’t always possess the resources or time to fully vet strategic technology initiatives.

A finance manager can bring ROI (return on investment) discipline to IT’s various suggested projects and purchases. In fact, you hired your finance manager to weigh the costs and benefits of each of the tools that help your company achieve goals.

Let’s say a manager in your architectural services firm wants to order several new AutoCAD licenses. What’s the payback period, and how much efficiency will the new licenses bring?

5. What does our capital structure look like five years from today?

In some cases, entrepreneurial start-ups receive owners’ equity from day one, and expand through self-funded growth.

In other cases, a company’s capital structure will consist of a mix of equity and debt. You can review a current balance sheet with your finance manager to see exactly what your firm’s capital structure looks like today.

If you’re planning on growing, envision the money piece of the journey ahead of time. You may not have a detailed strategic plan written in five-year increments. Moreover, you probably have a good idea of where you’d like the company to be five years from today. Will you need to alter your capital structure to get there?

In other words, will you put in additional capital of your own, take in outside investors, add debt, or mix any of these three strategies? Or could your business provide the earnings and cash flow to hit your targets itself? Debt often plays a more important role on a company’s balance sheet as an organization grows.

Additionally, your finance manager can do the heavy lifting of modeling earnings, cash flows, and capital expenditures. If projections show that your future capital entails heavy borrowing in year three, however, you can work on those key banking relationships today. Like the cash flow teamwork we discussed at the beginning of this article, envisioning capital structure with your finance hire is an extremely fruitful exercise.

Call Williams & Kunkel CPA today in Flower Mound at 972-446-1040 to have a chat about your business. 

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Source: Motley Fool

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